Money influences everything in our lives: the choices we make, the opportunities we pursue, and the futures we envision. Not only is money management a survival skill of the 21st century, it’s integral to each of our personal growth journeys.
When we’re fortunate enough to move beyond living paycheck-to-paycheck, we have an incredible tool of creation at our fingertips. Like water in a garden, money can nourish beautiful flowers or ugly weeds in our life–sometimes both if it’s not given any direction. This is why understanding what’s important to clients (e.g. values and vision for the future) is the first part of our financial planning process. Knowing what’s important helps match our financial plans to our intentions.
I was recently introduced to another concept that helped me understand what money itself means to me and my values: the Statement of Financial Purpose, which comes from Carl Richards, CFP® and author of The One-Page Financial Plan. In this blog post, I’ll explore how this simple yet profound declaration could transform the way you manage your finances and live your life.
Defining the Statement of Financial Purpose
The Statement of Financial Purpose can be thought of as a personal mission statement that revolves around the role money plays in your life. It begins with the phrase, “Money’s purpose in my life is to…”, and it’s up to you to complete the sentence. This exercise might seem trivial at first, but it can be insightful and revealing.
Why is it important to have a Statement of Financial Purpose?
- Align Your Values with Actions: Your financial decisions should align with your values and long-term goals. By identifying your Statement of Financial Purpose, you create a clear connection between your beliefs and your financial behavior. This alignment can help you avoid impulsive spending or investing in things that don’t contribute to your overall well-being.
- Prioritize Your Goals: Having a clear Statement of Financial Purpose empowers you to set specific goals that matter most to you. Whether it’s traveling the world, starting a business, giving back to the community, or providing a secure future for your family, your Statement of Financial Purpose will serve as a guidepost for your objectives.
- Simplify Your Decision-Making: In a world of endless choices, knowing your financial purpose can make decision-making less overwhelming. You can evaluate opportunities and expenses based on whether they align with your purpose, helping you stay focused on what truly matters to you.
How to Craft Your Statement of Financial Purpose
Creating your own Statement of Financial Purpose is a deeply personal and reflective process. Here are some steps to guide you:
- Do Some Self-Reflection: Take some time to contemplate what money truly means to you. Think about your past experiences, beliefs, and upbringing related to finances. Ask yourself questions like, “What brings me the most fulfillment in life?” or “How do I envision using money to improve my life and the lives of others?”
- Identify Your Core Values: Your financial purpose should be rooted in your core values. A good way to do this is to imagine if money weren’t a concern. How would you live your life? Maybe independence is important to you, experiencing adventure, promoting education, supporting loved ones, or making a positive impact on the world.
- Draft Your Statement: Begin your statement with the phrase, “Money’s purpose in my life is to…”, and complete it with a concise and meaningful expression of your financial purpose. You’ll know you’ve hit on your statement of purpose when you can imagine every single dollar you spend serving that purpose, even the money that you save, invest or put toward boring / essential things.
- Revisit and Revise It: As life evolves, so might your financial purpose. It’s essential to revisit and revise your statement periodically to ensure it remains relevant to your current circumstances and aspirations.
When I was first drafting my own Statement of Financial Purpose, I remember writing that money’s purpose is to bring security to my life. But I dug a little deeper by asking myself, “But what does that security let me do?” After a few more iterations, I landed on, “Money’s purpose in my life is to create heaven on Earth with the people I love.” It sums up everything for me. I want to create an awesome life, full of the things and experiences I consider to be “heaven” and to share those things with the people I care about. When I save money, it’s to ensure I can afford those things in the future. And when I spend money on myself and the essentials of the day, it’s so that I can be better equipped to create that heaven on Earth with the people I love.
Your Statement of Financial Purpose can be a simple yet effective framework that empowers you to manage your finances with intention, purpose, and authenticity. By connecting your values to your money decisions, you’ll discover a newfound sense of fulfillment and clarity in your financial journey. Let your Statement of Financial Purpose be your North Star, guiding you toward a more meaningful and prosperous life.
Brandon Tacconelli is the Director of Client Care at Thinking Big Financial, Inc. Thinking Big is a fee-only financial planning firm in New York City specializing in working with the LGBTQ+ Community.